GM Not Allowed to Pay CEO as Much as it Wants

The U.S. government limit GM’s budget for its CEO, Dan Akerson, payment.

In 2011 GM paid Akerson $7.7 million, but the company wanted to pay him more, so on Friday, April 27th, it took the opportunity to call out government rules that continue to limit Akerson’s pay. In 2009 the government bailed out GM, giving the Treasury Department say over its executives’ pay packages. Although the company had a record-breaking year for profits last year, the government still retains almost one third of the company’s stock. GM argues that Akerson’s salary is less than that of corporate chiefs at comparable companies. For example Ford’s CEO Allan Mulally received almost $30 million in 2011.

Akerson’s salary won’t rise next year since the Treasury Department announced earlier this month that it’s freezing executive pay for GM, AIG and Ally Financial at 2011 levels, the three companies which are still repaying government funds. In the recent weeks CEO pay has been the subject of many controversies, a group of shareholders at Citigroup even voted to reject the bank’s executive pay package, considered unnecessarily large.

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When I first read this, I thought it might be a case of government intruding on private business. But then I thought about it, and I believe it is what the free market is supposed to be. We seem to have forgotten that the company BELONGS to the SHAREHOLDERS, not the CEO! And if the US government is a major shareholder, then it has a say in how the company is run.